Apple's board needs to resolve Jobs' health mystery

SAN FRANCISCO (MarketWatch) -- It seems that directors at Apple Inc. are not immune to reality distortion fields, like the ones created by none other than the company's charismatic, controlling and temperamental chief executive, Steve Jobs.

The two contradictory statements issued by Jobs in the last two weeks -- one that he had a treatable hormone imbalance, followed by another nine days later that he is taking a medical leave for six months -- have dispelled any remaining notions of credibility that the company has in terms of honest communications.

It's time for Apple's
AAPL, +1.56%
board to take control of the current situation and come out with more details about Jobs' health. If nothing else, at least tell investors whether his pancreatic cancer has returned, which is what everyone is worried about.

Perhaps this would stop the endless flow of stories by some, with doctors speculating on which of Jobs' organs may be failing or in need of replacement. See full story.

"Unfortunately these two statements in rapid succession raise suspicions," said Kurt Hanson, director of Santa Clara University's Markkula Center for Applied Ethics. "If I were on the board, I would want to engage in overcommunication in the next six months to help dispel the suspicion that exists today." (Interesting that the center's board chairman is Mike Markkula, who was chairman of Apple until 1996.)

So the question must be asked, if Jobs' health problems turn out to be so serious that he cannot return to the helm, are directors at all culpable in this whole saga by failing to disclose information to investors? Some attorneys even have suggested that Apple could be vulnerable to shareholder lawsuits.

"It becomes material when the CEO cannot perform his duties," said Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance.

Now that Jobs has stepped down for his six-month medical leave, it is clear he cannot carry out his duties and that he needs to focus on recovery. So what did Apple's board of directors know and when did they know it?

"No one wishes [Jobs] ill," said the Markkula Center's Hanson. "Nonetheless, there is an obligation on the board's part to disclose what they know to the investing public."

Hanson added that the board has a legal responsibility to disclose pertinent or material information, and Jobs has an ethical responsibility to tell them the facts.

Jobs stated on Jan. 5 that a few weeks prior, he decided to get "to the root cause" of his weight loss. But that seemed to be disingenuous. After all, how can someone who looked like they lost serious body mass have waited so long to address the issue, especially with the press speculating for the last seven months?

The issue resurfaced again right before Macworld, with Jobs acknowledging that "the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple."

As we know, though, Jobs prefers alternative therapies. Perhaps he hoped that whatever other treatments he explored would be enough. Still, the board knew in 2003 that Jobs had a rare but treatable form of pancreatic cancer, and fretted while he sought alternative treatments until he decided to have surgery. Apple didn't issue a statement until after he was recuperating from the surgery in 2004.

So what did Apple's board of directors know and when did they know it?

Apple's board consulted Silicon Valley's legal gurus at Wilson Sonsini Goodrich & Rosati, and they appear to have gone with the exact definition of disclosure -- that investors should be told when the chief executive can no longer perform his or her duties.

One interesting factoid is that the Apple board has some serious heavy hitters in technology, government and medicine. They include former Vice President Al Gore, Google Inc.
GOOG, +1.21%
chief Eric Schmidt and Genentech Inc.
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chief Arthur Levinson, who joined the company as its senior scientist and also sits on the board of scientific consultants to the Memorial Sloan-Kettering Cancer Center.

"The big question is, is this a board-driven process or is it driven by the CEO?" asked the Weinberg Center's Elson. "Clearly it should be driven by the board."

Elson also said that the company's lack of a clear succession plan and an overemphasis on the personality and vision of its leader were big issues.

Apple said Chief Operating Officer Tim Cook will be at the helm until Jobs returns. Cook joined the company in 1998 and was instrumental in turning it around with Jobs after its near brush with bankruptcy. Some analysts see Cook as an operations maven, and others within the company could take on the visionary/evangelist role, like its lead designer and senior vice president for industrial design, Jonathan Ive.

So far, though, it is hard to cite another executive within Apple who has the special aura of Jobs. Jobs can make every new product really seem like the greatest tech advance ever, and he has pushed his teams to develop innovations that shake up their industries like the iPod, the iTunes music store and the iPhone.

"[Directors'] obligation is to the shareholders, and an organization that is perpetual shouldn't be linked to one individual, and that's the problem," Elson added.

Based on the statements coming from Apple, it appears to be a process led by Jobs, who has stated that he doesn't want to discuss his health. That, of course, is a private matter, unless you are running a multibillion-dollar company inextricably tied to you and your vision.

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